Reverse Mortgage changes

Changes are in store for the way reverse mortgages are processed that might make it more difficult for some borrowers to qualify.

....the U.S. Department of Housing and Urban Development, which oversees FHA, is working on new regulations - likely to debut in 2012 - that would require lenders to perform such financial underwriting. As a result, "it is possible that some borrowers who could have gotten a reverse mortgage before" will no longer qualify.

The new regulations are also likely to give lenders the right to require borrowers with smaller financial cushions to receive monthly payments, rather than a lump sum. To ensure that borrowers have enough cash to cover their property taxes and homeowner's insurance premiums, the new regulations may also allow lenders to set aside a portion of a reverse mortgage's proceeds for those expenses."

Here is the biggest danger; if you don't pay your property taxes or homeowners insurance you will go in default...but that's the exact same way a forward mortgage works.

The only other danger is if one spouse decides not to go on the reverse mortgage(for age reasons normally); if the spouse on the reverse mortgage passes away...the surviving spouse will have to refi or sell the house within a year. But that's ONLY if the surviving spouse is not on the reverse mortgage. AND, both spouses are required to be educated on this aspect by a HUD counselor.

These programs aren't for everybody; but generalizing without specifics doesn't help anyone..

We have known people who have lost everything going this route. It's a dangerous decision to make.

I'd far rather sell my home outright, get the full price (minus broker's commission, of course) in my pocket to invest, spend or bequeath as I like, and go into one of the very nice senior apt. buildings in my area. Reverse mortgages are NOT designed to benefit the homeowner.

The fees and charges are not enormous ... compare them to a regular FHA forward loan, and the difference in the fees is the origination charge for the Reverse loan, which many lenders waive. There are also new low cost options available. Like any other mortgage product, borrowers need to shop around for the best deal they can find.

If people lost everything, then they didn't take the time to understand the product before they took it out or they couldn't manage their money. It takes an informed decision, not dangerous one.

Again, as Jason said ... there programs aren't for everyone ... but they certainly help many people who want to stay in their home.

And another option is to do exactly what you would do ... but many people would rather stay in their home. Reverse mortgages ARE designed to benefit a homeowner without the means to stay in their home, if that's the choice they want to make.